Will Bitcoin fail the way all 'New Money' has failed in the past?

By Leo Zhang

May 22, 2018

Nobel Prize economist Robert Shiller, famous for his studies on financial crises, expresses his pessimistic view on the "Bitcoin bubble". In the article below, Dr. Shiller parallels cryptocurrency with some of the attempts to invent "new money" in history (see story below). It is no secret that there were many iterations of digital money before Bitcoin. However, Nakamoto consensus is a radical invention that Dr. Schiller is not taking into account in his argument. On a self-sustaining, distributed consensus system, money is the most primitive application.

"New ideas for money seem to go with the territory of revolution, accompanied by a compelling, easily understood narrative. In 1827, Josiah Warner opened the 'Cincinnati Time Store' that sold merchandise in units of hours of work, relying on 'labor notes,' which resembled paper money. The new money was seen as a testament to the importance of working people, until he closed the store in 1830."

1/10 The reason "Blockchain" is so susceptible to cargo cult mentality is that the fundamental features that make it what it is are, in a sense, invisible, and inseparable from how the technology works.

"Arge institutions that deliver very few innovations, such as FedEx and Deloitte, specially when we consider the amount of resources at their disposal, had too much time to speak. But even most the startups were talking big, while delivering little."

"Selfish mining is an attack on the Bitcoin protocol, but the arguments present in the literature do not properly justify the attack. They lack of a correct evaluation of the cost of the attack and a proper analysis of profit and loss per unit of time. To compare the profitability of different mining strategies one needs to compute the average length of their cycles and their profitability ratio, that is a new notion introduced in this article."

"Pisa focuses generic state channels which can be used to build any application (i.e. payments, auctions, boardroom voting, gaming). The core contribution is a new protocol for hiring a new third party agent called the custodian. This custodian is designed to help alleviate a new assumption in state channels which require every participating party to remain online (synchronised with the blockchain)."